A healthier economy, stable job growth and low mortgage interest rates have led to a slow but steady recovery in the housing market after seven lean years of new home construction.
Moreover, home prices continue to increase across the country, resulting in increased equity for homeowners, helping to boost the home remodeling market.
All this is good news for the providers of lumber and other wood products used in construction, fueling the prospects for two of the largest pure-play suppliers, Universal Forest Products and Louisiana-Pacific.
“People think that the housing recovery, although it’s been modest, is fairly stable with more upside opportunity,” said Matthew Missad, CEO of Universal Forest Products. “The fact that it’s steadier, albeit at a lower level, is still a positive.”
Like the actual industry, various types of building supply stocks are scattered across numerous groups among IBD’s 197 industries. Combined, they are a small piece of the single-family home construction market, which the National Association of Home Builders estimated to have grown 12.9% in 2015 to $218.3 billion. The market set its record above $413 billion in 2006. And, although many of the sectors across this market have been consolidating over the past 25 years, it remains a fragmented industry punctuated by a number of large names.